Medicare fraud: Dozens charged in record scam

Michael Dobrushin is led in handcuffs from FBI headquarters Oct, 13 in New York. He is one of 73 people across the United States charged in what federal prosecutors say is the largest Medicare fraud on record.

A vast network of Armenian gangsters and their associates used phantom health care clinics and other means to try to cheat the government medical insurance program Medicare out of $163 million, the largest fraud by one criminal enterprise in the program's history, U.S. authorities said Wednesday.

The operation was under the protection of an Armenian crime boss, known in the former Soviet Union as a "vor," prosecutors said. The reputed boss, Armen Kazarian, was in custody in Los Angeles.

Bharara said it was the first time a vor — "the rough equivalent of a traditional godfather" — had been charged in a U.S. racketeering case.

Kazarian, 46, of California, and two alleged ringleaders — Davit Mirzoyan, 34, also of California, and Robert Terdjanian, 35, of New York — were named in an indictment in Manhattan charging racketeering conspiracy, bank fraud, money laundering and identity theft.

The indictment accused Terdjanian and others of hatching other schemes involving stolen credit cards, untaxed cigarettes and counterfeit Viagra. It also alleges that during a meeting last year at a Brighton Beach restaurant, Terdjanian pulled a knife on someone who owed him money "and threatened to disembowel the individual if the debt was not paid."

A judge jailed Terdjanian without bail Wednesday at a brief hearing. Afterward, his attorney said his client denies the charges.

Kazarian and Mirzoyan were scheduled to appear in court Wednesday in Los Angeles.

Authorities began the New York-based investigation after information on 2,900 Medicare patients in upstate New York — including Social Security numbers and dates of birth — were reported stolen.

The defendants in the New York case also had stolen the identities of doctors and set up 118 phantom clinics in 25 states, authorities said. The names were used to submit fake bills for care that was never given, they said.

In the New York portion of the case, more $100 million in fraudulent bills were submitted and Medicare paid out at least $35 million, sometimes by wiring it to the clinics' banks accounts, investigators said.

Most of the defendants "were Armenian nationals or immigrants and many maintained substantial ties to Armenia" and criminals there, the indictment said. Couriers would often carry cash proceeds from the fraud back to Armenia, it added.